Payday loans are cash advance loans furnished by the lenders against a post-dated cheque. These loans are meant to help the borrower with the most urgent expenses due to their high APRs. While taking out these loans the borrowers must be careful in picking their lender, since they must have valid licenses from the Nevada Department of Business Oversight to operate lawfully in the state.
When the consumers start doing business with an unlicensed lender, whether operating from a storefront or online, they are less likely to get benefited from the protections that the state law provides. These protections include a limit on the amount that can be given as a payday loan and the fee that can be charged, also the lender has to provide the consumer with all the important information pertaining to the loans.
How do payday loans work?
Online Payday loans are cash advance loans furnished by the lenders
In a deferred deposit transaction commonly known as a payday loan, the consumer gives the lender a post-dated personal cheque of the amount of the loan. The lender gives the money after subtracting a fee agreed upon earlier. The lender then deposits the borrower’s cheque at the date due for loan repayment.
Maximum Amount – the personal cheque furnished by the borrower cannot be for more than 300$.
Maximum Fee – the maximum amount that the lender can charge from the consumer for the loan is roughly 15% of the provided loan amount. so if you are giving the lender a cheque for $300 and the maximum fee charged is 15% then the fee for your loan will be about 45$. This means that you would actually get only 255$ against a $300 cheque.
APR or annual percentage equivalent of the fee- the lenders are required by the law to tell all the borrowers the equivalent loan fees in terms of Annual Percentage Rate or APR. For a typical California Payday loan the annual percentage rate works out to be more that 400%.
Maximum duration for the loan – A payday loan cannot be for more than 31 days.
Extension on loan repayment – lenders can provide the borrowers with a time extension for repaying the loan and the lender cannot levy any additional charges for the same.
Charges for Returned Cheques – lenders can ask for a maximum amount of $15 if the cheque provided by the consumer is not honoured and returned by the bank concerned.
Things that the lender must tell the consumer
The complete amount in terms of Annual Percentage Rate and dollars.
The payment obligations of the consumer.
The charges due to a returned cheque.
The lenders cannot take collateral or ask the consumer to buy a product in order to get a payday loan.
The consumer cannot be threatened with prosecution or prosecuted for the collection of loan payment.
Things that lenders cannot do:
Take blank cheques
Approve a loan for a borrower has an outstanding loan.
Commit any unfair, unlawful or deceptive act.